Justin Sexten: Looking Forward
There is something about a new year that causes us to reflect on the past and look forward to the idea of starting fresh. Optimism is high for 2021 as few can imagine a year with more challenges than 2020.
Imagine a year ago if someone had suggested the FDA would approve a vaccine in 8 months, face masks would be as common as a hat, states would shut down indoor dining and public schools would move to virtual learning. Each of these itself would be considered highly unlikely and the combination impossible as we started 2020.
Today we look back at the outcomes from 2020 through the lens of hindsight and context. The illness and tragic loss of life caused by Covid-19 caused the implementation of these extraordinary prevention measures. When you look back at how the seemingly impossible came to be, do you consider the outcome or the information available at decision time?
A new book, How to Decide: Simple Tools for Making Better Decisions, author (and poker player) Annie Duke brings to light the idea that an outcome focus can bias one’s view of successful decisions. As you look back on your operation in 2020 was your most successful decision because the outcome was favorable or did you make the right decision using available data despite an unfavorable outcome.
Market timing is a good illustration of the outcome bias question. When we sell cattle and watch the market drop the next two weeks, most of us are confident the marketing decision was a good one. Alternatively, if the market turns higher for two weeks after marketing are we still confident in the decision?
The decision and the data used to support it are the same; the only difference is the outcome. As the year ends, consider refining the process used to inform and accomplish the goals of 2021 rather than reflecting on the outcomes alone.
Outcomes based evaluation can be daunting in an industry where some have suggested black swan events are as common as migrating geese. Over 18 months the beef industry observed the impact a supply chain disruption can cause to the market, twice.
One cannot ignore the overall industry direction, history shows it can affect the marketplace. The number of outside influences challenging the beef industry continues to grow and diversify their impact. No matter who or what you include on your list, the ability to control their effect on your business is at best marginal.
Resource allocation is one of the most challenging and important decisions operations make every day. Nearly every decision deploys some form of capital, labor or both fortunately resource allocation is the one area operations have the greatest control over.
Purchase an adjoining pasture, raise or buy hay, keep more heifers, hire trucks are all resource allocation decisions. Even the decision whether or not to shut a gate when checking cattle is a labor allocation decision.
Many of these decisions are simple and for some even routine. While a routine process saves us time, the author highlighted the impact these routine decisions can have when not revisited occasionally. The example she shared was that eating a doughnut was not a poor health decision as a single event, however eating one everyday could become a poor decision without considering the long-term impact.
Don’t sacrifice the long-term health of the operation by taking for granted small, repeated decisions. The 2009 University of Arkansas study where only 27% of tested refrigerators kept animal health products at the correct temperature is a good example of this decision type.
Before setting goals evaluate areas of the operation lacking actionable information to improve marketing and management decisions. In some cases data may indeed be the missing link. Few times in history have more technologies been available to collect data.
More often producers are drowning in data without the time to convert data to management decisions. A new year is a good time to visit with your advisors, nutritionist and veterinarian to revisit the success and challenges of the past and develop plans to inform the decisions of 2021.
Lessons learned from the pandemic marketing year suggest a decision structure built on gathering the most relevant data while minimizing the noise of the uncontrollable and maintaining execution flexibility offers operational resilience. While not a guarantee of favorable outcomes the odds favor planning over luck.